Decision Maker: Audit and Risk Management Committee
Decision status: Recommendations Approved
Is Key decision?: No
Is subject to call in?: No
RECEIVED from BDO the Enfield project plan for the year ending 31 March 2019.
1. The report was introduced by David Eagles (BDO).
2. A de-brief meeting had been held between BDO and the Council’s finance team on 20 November 2018. A number of action were agreed to ensure that BDO plan to meet the statutory deadline of 31 July 2019 for the 2018/19 audit.
3. The key areas of the plan that were discussed and agreed, as detailed on pages 1-2 of the report:
c. Interim Audit visit
d. PPE valuations
e. Technical reviews
4. The following questions and queries raised in response to the report:
a. Gemma Young (Head – Internal Audit & Risk Management) asked for clarity regarding the communications plan. If there was any slippage in what BDO has planned what would the escalation process to senior management and those charged with governance be. David Eagles (BDO) clarified that the finance team would be on-site so BDO would have a chance to talk things through with them. In addition to the interim visits and final stages of the audit, there will also be a weekly formal catch up with all involved if needed. So, if there any significant issues, these would be flagged up to Fay Hammonds team for a mitigation discussion. If there was anything, BDO felt, that was a real risk then this would be initially reported to the Chair of the Committee and then to the committee through progress reports. Fay Hammond further clarified that there were 2 levels of formal meetings arranged:
· Operational meetings – more frequent.
· Higher level – Chief Executive, once or twice a year.
b. Councillor Leaver confirmed that BDO are bringing all the audit risks forward to the interim period. David Eagles confirmed this and further clarified that some things were inevitably back ended which would be looked at by the year end i.e. production of the accounts.
c. Councillor Leaver asked if there was enough time from May/June 2019 to finalise the 2018/19 accounts ready for sign off. David Eagles clarified that there was enough time. The intention of the Gantt charts, as detailed on pages 5-6, of the report is to show who BDO have got coming in to do which particular things at which particular point in time. This would allow BDO to clearly see where the pinch points are.
d. Fay Hammond’s comments that finance were very pleased that more things were being done up front but it did require officers to do things differently. Fay didn’t think that there was any more that could be done other than the plan being reported on, except pushing boundaries on the technical review side and how that worked from BDO’s side.
The key problem areas’ that BDO had with the 2017/18 accounts had been valuations of the HRA asset account, the post codes used to make those valuations and the Meridian Water asset classifications.
e. David Eagles further clarified the Meridian Water asset classification:
· BDO had concluded that the classification of those were they are surplus assets because that fitted the development the council were working on at the time. As that has now moved on the classification may have changed. BDO now recognise that and would be doing some work to see what the classification could be based on in terms of what stage the development model was at now.
· In terms of commissioning the valuations, BDO are already commissioning on the basis of the valuation method last year but also recognising it could change and were putting measures in place to cover this.
f. Fay Hammond further clarified in terms of PPE. Finance had done everything it could within the commissioning document to avoid having a repeat of questions from previous years. An example of this was that finance had asked the valuers’ that rather than obtaining the valuations and then question differences, a question in the commissioning document has been entered saying ‘tell us why the valuation is different’ up front. The plan was to allow GVA (Valuers) to meet officers at the Meridian Water site to talk through what the council are doing at the site before GVA start the valuations. This was different from last year’s audit and would address key issues. BDO requested if they could also attend that meeting on site with GVA and council officers.
g. The Chair enquired about Brexit and if it would be affecting BDO’s employees and what plans were in place to combat this. David Eagles clarified that their firm were not reliant on contractors who would leave in light of Brexit.
h. Peter Nwosu (Independent Member) commented about the technical reviewer and asked why they could not talk directly with council officers and what the technical review was for. David Eagles clarified that the technical review was of the financial statements but was not a quality review. Peter Nwosu further questioned that given that the financial statements are prepared by the Council, why couldn’t officers talk directly with the technical reviewer. David Eagles clarified that the reviewers had been set up to be independent of the audit team, so the reviewer is not influenced by the direct relationship of the Council. They are providing an independent review of the accounts, challenging what has been disclosed independent of the audit team. The reason for the independence is to try to avoid them coming to a conclusion, wrongly influenced by the relationship with the Council.
i. Councillor Leaver asked about the technical review of the Meridian Water audit and what it was of. David Eagles clarified that the review was regarding the disclosures and the figures within the PPE account to see how these were prescribed.
j. Councillor Savva stated that with a little more effort from all concerned, we may be able to avoid all these issues and delays regarding the sign off to the financial statements. This has been compounded with the signing off of the accounts, two months earlier. What can be done by BDO/officers so as to assure the committee that all the issues will be avoided so as to have sign off by the end of July 2019. David Eagles clarified that the key things BDO had issues with, in terms of challenges to the audit work, regarded valuations. The way BDO have now approached the valuation commissioning document, for this issue, deals head on with the auditing issues that BDO experienced last year.
In terms of avoiding the pressures, BDO have pulled out testing based on samples from the final stages of the audit. This equates to 75% of the testing which will now be done in the first 9 months of the year during BDO’s interim phase and would reduce the late sign off risk. This would be topped up with a second interim phase aswell. This would leave the final stage of testing for the last 2 months of the audit. BDO would still have to look at the final accounts, final valuations and other things coming through at that late stage.
The Gantt chart (as detailed on pages 5-6) maps out what BDO/Council officers will be doing as the process goes through from now until the end of July 2019. The audit plans and key risks will be presented at the 24 January 2019 meeting, with the risks and update on the interim phase presented at the 6 March 2019 meeting and show what stage we are at and how things are progressing with the audit.
k. Peter Nwosu questioned the costs of the audit and whether the volume of work will affect the audit fee. David Eagles clarified that the PSAA set the fees unless there is a significant risk change. The volume of work should be much the same, which is being done in a different phasing. BDO were not expecting any more work.
l. Fay Hammond (Director of Finance) clarified that there wasn’t anything more that can be done to safeguard the sign-off of the accounts by the end of July 2019. There is now a plan which must be delivered and monitored against that plan.
The timeline (as detailed at page 3 of the report) requires the Council to also do various things at the right moment aswell as BDO. It is a mutual timeline and will be monitored through monthly or weekly meetings with BDO. Any slippage to the timeline will need to be reported to senior management.
AGREED to note the Audit Project Plan for 2019/20.
Publication date: 19/12/2018
Date of decision: 06/12/2018
Decided at meeting: 06/12/2018 - Audit and Risk Management Committee